The cost of having children can be considerable. From the
early costs of the pregnancy and delivery, to daycare, soccer
lessons, orthodontist bills, and summer camps--the list never
To begin to estimate the cost of raising a child, use MsMoney.com's Cost
of Raising a Child Tool.
Life doesn't always give us the luxury of advanced planning
for children, but it's never too late to reap the benefits
of thinking ahead.
Financial Planning Steps to Take Now
Take the time to investigate the insurance coverage
that your employer offers, and what type of prenatal
care and delivery it covers.
Find out if you will qualify for disability coverage
while you are out on maternity leave.
Check to see how much adding dependents to your medical
plan will cost.
Start a special savings account earmarked for baby-related
expenses like decorating a room, or buying clothes and
Keep in mind that pregnancy can be expensive--think
about borrowing clothes from friends, getting lower
prices at consignment stores or prowling garage sales
for used strollers, baby cribs, etc.
That's only the beginning. The major costs associated with
raising a child starts after your baby arrives. Large expenses
such as childcare can be just as significant as car payments
or insurance costs. When all is said and done, raising a child
can run into the hundreds of thousands of dollars, and paying
for private school tuition can easily double that figure.
Reducing Childcare Costs
The high cost of childcare can strain any budget. Working
couples can pay a whopping 10-20% of their incomes on childcare
while their children are small. After taking a hard look at
the cost of care, some couples decide that it makes better
financial sense for one parent to take a few years off to
stay home with the baby.
Luckily, the government offers several tax breaks to families
- Pay with pre-tax dollars. You can significantly
cut the cost of childcare by paying with pre-tax dollars.
Check with your employer to see if this is available. The
money will be taken from your paycheck before the tax is
- Take the childcare credit on your tax return. The
government offers a tax credit that you can subtract from
your tax bill at the end of the year. Unfortunately, you
aren't allowed to use both the childcare tax break and the
child tax credit.
- Save on childcare costs by forming a babysitting co-op
in your neighborhood. These groups swap babysitting
duties with each other on a pre-arranged schedule to give
everyone an occasional break.
- Form a "Saturday Night Club" with other working
parents. Here's the idea: four families with children
of the same age agree to the following: Each couple takes
turns watching all of the kids one Saturday night a month,
leaving the other couples with three Saturday nights to
themselves and save on the cost of babysitters.
Reducing Your Children's Spending
The more time you spend teaching young children good money
habits and discouraging them from wanting needless things,
the lower the financial impact their teen years will have
on your family budget.
The best way to reduce the cost of the things that children
want is simply not to buy them. By trying to instill healthy
money habits and attitudes from the time children are very
young, you will be able to save a great deal of money in the
Raising money-smart kids pays off both financially and emotionally.
When you take the time to teach your children how money works,
why to save it, and how to make it, you are passing down important
information about your family's values and beliefs.